In trading — whether you are working with currencies, indices or stocks — a lot depends on the tools you use. Even the chart type plays an important role in providing optimal trading results.
This article is definitely tailored to the needs of novice traders. However, it doesn’t mean that experienced ones won’t benefit from reading it. Choosing the chart type that suits your trading style, time frame and asset is a good thing to start with.
First, all the charts have several things in common. Price is shown on the vertical axis, time — on the horizontal axis. The time scale can be adjusted in accordance to different time frames.
On the IQ Option platform there are 4 different chart types to choose from. Each of them has advantages and disadvantages of its own. Don’t be afraid to try all of them before sticking to one or another.
Linear chart is the most basic and also the easiest way to display data on the screen. This chart is easy to understand and use in trading. However, its performance can be lagging behind its advanced counterparts when it comes to long-term trading and application of advanced technical analysis tools.
- Visual simplicity of the Linear chart makes it better suited for short-term trading.
- Linear chart makes the graph look simple by showing less (no information about opening, high and low prices), good for novice traders.
- Not the best chart type for in-depth analysis, especially on longer time frames.
- This chart type doesn’t demonstrate the price gaps.
Candles are the most popular chart type out there. Most professional traders stick to them, as they provide additional opportunities for technical analysis.
Candles might need just a little bit of explanation. With a Line chart everything is quite simple: the price goes up and down, and the trend line will follow it. Candles work differently. Each candle displays not a moment but a period of time and will therefore have the opening price (the price at the beginning of that period), closing price (the price at the end of it), as well as high and low prices. The distance between opening and closing prices is the body, thin outliers are the shadows. The candle will change its color based on the performance of the asset: should the closing price exceed its opening price, the candle will turn green, should the closing price be below the opening price, the candle will be red.
- This chart type is the easiest way to analyze the performance of the price on all time frames.
- Gives access to extensive information (opening, closing, high and low prices).
- No information on the price movement within the trading period.
Bars are an alternative take on the Candlestick chart. Looking a little bit different, they utilize the same principles and work in the same way. This chart type also displays opening, closing, high and low prices. Just like candles, it will turn red if the price decreases over the period of one bar and green should the price increase over the same period.
- Demonstrate all the necessary information (just like candles) but do it a little bit differently.
- Make the gaps on the market visible.
- Price movements that happen within the trading period are not displayed. Smaller time frames may be required for additional information.
An alternative to classic candles, Heikin-Ashi will suit those looking for a smoother version of the candlestick chart. It can help traders spot the prevailing trend. It is both a chart and a trend-following indicator.
- Smooth chart type with extensive technical analysis capabilities.
- Basically two-in-one.
- Not ideal when working on short-term time frames.
- Makes it harder to notice the slightest movements of the price.
Don’t let this piece of information be just another article you read online. You can pick and practice with any optimal chart type in order to find the one that suits your trading style.To the platform